Which income are exempted from tax?


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In computing the total income of a previous year of any person, any income falling within
any of the following provisions of Section 10 shall not be included:-
1. Agricultural Income u/s 10(1).
2. Share of H.U.F.’s Income / Wealth u/s 10(2).
3. Share of profit of a Partner u/s 10(2A).
4. Amount received under a Life Insurance Policy u/s 10(10D).
5. Interest on P.P.F. / S.P.F. u/s 10(11).
6. Certain interest incomes u/s 10(15).
7. Scholarships u/s 10(16).
8. MP’s / MLA’s allowances u/s 10(17).
9. Awards / Rewards u/s 10(17A).
10. Pension received by a person, honoured by a gallantry award u/s 10(18).
11. Family pension received by the family members of armed forces u/s 10(19).
12. Income by way of dividend u/s 10(34).
13. Income from Mutual Fund etc. u/s 10(35).
1. Agricultural Income [Sec. 10 (1)]
Agricultural Income from land in India is exempted from tax.
However, foreign agricultural income is taxable as income from other sources.
2. Share of H.U.F.’s Income / Wealth [Sec. 10 (2)]
Any sum received by a member of H.U.F. out of chargeable income will be exempt
from tax (i.e. will not be included in H.U.F. member’s income).
3. Share of Profit of a Partner [Sec. 10 (2A)]
Share of profit received by a partner of a firm. However, salary, bonus, commission,
interest on capital shall be taxable as business income.
4. Amount received from L.I.C. [Sec. 10 (10D)]
Any sum received under Life Insurance Policy, including the sum allocated by way of
bonus on such policy shall be totally exempt from tax.
Exceptions :
This exemption is not available in following two cases.
a) Any sum received under a KEYMAN INSURANCE POLICY.
b) Any sum received under an insurance policy in respect of which the premium
payable for any of the years during the term of policy EXCEEDS 20% of the
actual capital sum assured.
5. Interest on Public Provident Fund (PPF) / Statutory Provident Fund (SPF) [Sec.
10 (11)]
Any interest credited to P.P.F. or S.P.F. is fully exempt u/s 10(11).

6. Certain Interest Income Exempt [Sec. 10(15)]
1. Interest on notified securities/bonds.
Some of the notified bonds/securities are :
i. Post Office Savings Bank A/c (Upto Rs. 3,500 p.a.)
ii. Post Office Cumulative Time Deposits Rules, 1981.
iii. Fixed Deposit Scheme governed by the Post Office (Fixed Deposit) Rules,
1968.
2. Interest on Relief Bonds
3. Interest on Notified Bonds/Debentures of Public Sector Company.
4. Interest on notified bonds issued by a local authority.
7. Scholarships [Sec. 10 (16)] :
Scholarships granted to meet the cost of education is totally exempt from tax.
8. MPs / MLAs allowances [Sec. 10 (17)] :
Income by way of
(i) daily allowance or
(ii) Constituency Allowance.
Note : Salary of an MP/MLA is taxable under the head Income from other sources.
9. Awards / Rewards [Sec. 10 (17A)] :
[Received whether in cash or kind]
Any awards / rewards instituted in public interest by the Central Government or
State Government or any other body approved by the Central Government in this
behalf shall be exempt from tax.
10. Pension and Family Pension in certain cases [Sec. 10(18)] :
Any income by way of –
(i) Pension received by an individual who has been in the service of the Central or
State Government and has been awarded “Param Vir Chakra” or “Maha Vir
Chakra” or “Vir Chakra” or such other gallantry award as the Central
Government may, by notification in the Official Gazette, specify in this behalf, &
(ii) Family pension received by any member of the family of such individual.
11. Family Pension received by family members of soldiers [Sec. 10(19)] :
Any family pension received by the widow or children or nominated heirs of a
member of armed forces of the Central Government (including para – military forces)
shall be fully exempt, if the death of such member had occurred in the course of
operational duties. Exemption is subject to certain prescribed conditions.
12. Income by way of dividend [Sec.10 (34)] :
Income by way of dividend (including interim dividend) from a domestic company in
the hands of the shareholders is exempt from tax.
Note: However, dividend received from a foreign company or a co-operative bank or
other co-operative society is taxable under the head Income from other sources.
13. Income from mutual funds etc. [Sec. 10(35)] :
Income from units of Mutual Funds & from units of UTI shall be exempt from tax.


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